The Treasury just held its much-anticipated 7-year Treasury note auction. The sale of $26 billion in 7-year notes was the third leg in this week’s debt sales, which also included 2-year and 5-year auctions. So how’d the auction go? The notes sold at a yield of 3.3%, compared with pre-auction talk of 3.263%. The bid-to-cover ratio was 2.26, down from 2.28 at the last auction. Indirect bidders took down 33% of the notes sold, exactly the same as last month. In other words, not so hot. Long bond futures are trading right about where they were before the auction — down 15/32 (around the day’s low).
7-year note auction draws tepid demand
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Who are indirect bidders?
It is a group of bidders at U.S. debt auctions that includes foreign central banks. So demand from the indirect bidder category is seen as a proxy for foreign bond demand. Higher demand = less concern about the dollar and bond prices. Lower indirect bidder demand = big problems.